Question

C. (5 points) Below is Table 2 which compares how Sean feels about comic books and candy bars. Sean has $6.50 to spend. Comic books cost $2.00 each and candy bars cost $0.50 each. How should Sean allocate his money to maximize his utility? Explain your answer.

Answer 1

Since there is no competition in a monopolistic market, the monopolist can control the price and quantity demanded. At profit maximizing level of output under a monopolistic market, MC=MR

Hence Q=100 is the profit maximizing level of output, since at this quantity, MC=MR=50